General Motors still has plenty of issues to work out with the Cadillac Lyriq, Ford is worried about how much money it’s losing on its electric cars, and another Dieselgate exec will soon come clean. All that and more in this edition of The Morning Shift for Wednesday, May 3, 2023.
1st Gear: It’s Not Getting Any Easier
There are reasons for General Motors to be upbeat about the Cadillac Lyriq. The glitzy, low-slung electric SUV is corralling more younger buyers than Cadillac typically does, buyers that are also first-time customers for the brand. It’s a shame then that GM’s inability to stamp out production gremlins and build the thing quicker is frustrating reservation holders. From Bloomberg, which published a story Wednesday morning diving into the delays:
Some 1,000 customers put $100 deposits down in September 2021, and the vehicle sold out in 10 minutes. GM let more people order cars in early 2022. But a slow start at the Ultium plant in Lordstown, Ohio, where the automaker and partner LG Energy Solutions make battery cells, and software issues with the car meant last year’s fourth-quarter production resulted in just 122 deliveries of the Lyriq and fewer than 1,000 in this year’s first quarter.
It’s a frustrating stumble, and a customer service headache for GM. Cadillac message boards and Lyriq social media groups on Facebook are crackling with customers complaining about the wait and how communication among GM, its dealers and customers has either led to confusion or left them in the dark. Some buyers have abandoned their reservations, while others are waiting and grumbling.
Cadillac is offering $5,000 checks to those that have claimed a 2023 Lyriq, whose orders have been delayed until 2024. Unfortunately, even this mea culpa hasn’t gone as smoothly as it should’ve:
The company said that was done in part because the 2023 models had fewer features and lower prices, so Cadillac was protecting them from paying a higher price than they originally intended. But a spokesman said that if a dealership has already sold its allotment of Lyriqs, any customers ordering from its future inventory would not get the money because the company wouldn’t even know about the order.
One prospective customer quoted in the story said they were denied the check because they reserved their car from their local Cadillac dealer, rather than on GM’s website. They decided to pick up a Kia EV6 instead. Another, Tye Battle of Atlanta, ordered a Lyriq in the fall of 2021 and was promised a delivery window of about a year later. Battle is still waiting, and still pretty much in the dark:
The commercial real estate executive, who owned a Mercedes-Benz GLC 300 coupe before ordering a Lyriq, says he’d never even considered Cadillac before. But he thinks the Lyriq is more luxurious than Tesla’s offerings, and he likes the styling.
Battle has been waiting since September 2021 and was told the car would be delivered in the fall of 2022. Since it didn’t happen, he says he’s been told little about the delays except that the company was doing extra quality checks. “Everyone says the same thing,” he says. “We’d appreciate better communication. We know there are supply chain issues.”
The Lyriq has been an exercise in frustration for seemingly everyone: or GM, has been trying to push them out in spite of a variety of issues, from shoddy plastic on the liftgate to glitchy infotainment and instrument panel software, and for customers, for the reasons described. But hey — to be a modern auto brand in 2023 is to release a car before it’s truly ready, and I guess that means Cadillac has finally gotten with the times.
2nd Gear: Ford Red
Ford will spend between $1.5 billion to as much as $2 billion in an effort to restructure this year, which is another way of saying shut down shops and cut employees. Courtesy Reuters:
The charges will be primarily attributable to “employee separations and supplier settlements,” the automaker said, adding additional restructuring actions may be taken “where a path to sustained profitability is not feasible when considering the capital allocation required for those businesses.”
Earlier this year, Ford said it plans to cut one in nine jobs in Europe, as part of a drive to lower costs in the region and concentrate engineering know-how in the United States.
It has also been curbing operations in countries such as Brazil and India, as it pours billions into developing electric vehicles.
The disclosure comes a day after the company posted robust quarterly results but issued a measured full-year outlook, weighed down by continued losses in its electric-vehicle unit.
Those results were somewhat encouraging, as Ford posted adjusted earnings of 63 cents per share, above an analyst-estimated 42 cents. However, Dearborn is still concerned about the remainder of the year ahead, and particularly about losses on its EVs. And it’s been taking a bath on those, as Bloomberg explained late yesterday:
For the first time, Ford reported results by business unit, rather than geography, after Chief Executive Officer Jim Farley radically restructured the 120-year-old company to increase focus on electric vehicles. The new-look balance sheet revealed Ford lost $722 million before interest and taxes in the EV business it calls Model e, while making $2.62 billion on its traditional gasoline-fueled models in its Ford Blue unit. It earned $1.37 billion on commercial vehicles and services in its Ford Pro business.
CEO Jim Farley is seeking an 8 percent return on EVs in three years’ time. Tesla’s global price war is not making that any easier, and so we have the restructuring.
3rd Gear: Porsche Is Not Afraid
Stuttgart will raise prices the world over even though its business is booming and order books are overflowing. Again, Reuters:
Luxury carmaker Porsche will raise prices by 4-8% in Europe and the U.S. in the second half to combat higher costs that weighed on returns in the first quarter, even as profits and revenue jumped by over 25%, it said on Wednesday.
The company was still seeing issues with the supply of semiconductors and parts for the electric Taycan’s high voltage heating system, but expects them to ease in the coming months, Chief Financial Officer Lutz Meschke said on a call following first quarter results.
Broadly, its order backlog was high globally after a record 18% rise in deliveries in the first quarter, and targets for 2023 of a 17% to 19% return on sales on revenue of 40 to 42 billion euros ($46.36 billion) were on track, Meschke added. [...]
The company reported revenue of 10.1 billion euros in the first quarter of 2023 and operating profit of 1.84 billion euros, beating expectations of three analysts polled by Refinitiv.
China was responsible for much of Porsche’s first-quarter growth, however, China is not where the company expects to lift prices in the second half of 2023. We’re just lucky like that.
4th Gear: Back to Dieselgate
Rupert Stadler, at one time the CEO of Audi, will confess to his role in Dieselgate in the next two weeks according to his defense team, according to reports. In exchange, he’ll pay a $1.2 million fine and have his up-to-two-year sentence suspended. From Automotive News:
Stadler was charged in 2020 over his role in the scandal after Audi parent VW Group admitted in 2015 to having used illegal software to cheat on emissions tests.
According to prosecutors, engineers manipulated engines in such a way that they complied with legal exhaust emission values on the test bench but not on the road.
Stadler is accused of failing to stop the sale of affected diesel cars in Europe even after U.S. authorities uncovered the engine-rigging. He had maintained his innocence, blaming engineers for his failure to uncover the widespread cheating.
Stadler was Audi CEO from 2007 to 2018. The premium brand is regarded as the originator of the emissions manipulation software.
Stadler’s defense team said a statement would be made in two weeks, after which the judge will decide whether the statement amounts to a complete confession.
Prosecutors have agreed to the deal. A judge had said Stadler faced a prison sentence of 1.5 to 2 years, which would be suspended if he agreed to make a confession.
Prosecutors were actually seeking a fine closer to 2 million euros, which is about $2.2 million, but Stadler’s team was able to get that knocked down because the guy doesn’t exactly have a job these days.
5th Gear: Stellantis Is Cautious
Stellantis had a great year last year, and its first-quarter net revenue rose 14 percent year-on-year in 2023 according to CNBC. And yet not terribly unlike Ford, the company isn’t getting too bullish about its expectations about the remainder of the calendar, mainly because its global inventories are growing. Per Reuters, one more time:
“It is a bit early to change any of our full-year forecasts,” he said. “Clearly the macro situation is still complex.”
Stellantis shares were down 1.8% by 1030 GMT, placing it among the worst performers of Italy’s blue-chip companies.
Total inventories at Stellantis rose to around 1.3 million units at the end of March, as logistic problems that hit Europe in particular last year were still being resolved by the owner of brands including Fiat, Peugeot, Jeep and Dodge.
“In Europe ... we have some challenges transforming company’s stock into dealer stock and therefore getting orders fulfilled with customers, which is still a challenge for our market share,” Palmer said.
Banca Akros analyst Gabriele Gambarova said average selling prices for Stellantis vehicles in North America fell 0.7% in the first quarter, the first year-on-year decline in 10 years, adding this “can pose some doubt on the sustainability of margins in this important area”.
Analysts at RBC said Stellantis inventory levels were higher compared with peers in North America, the group’s largest market.
Inflation aside, margins have been through the roof since the pandemic — the average new car transaction price doesn’t balloon from about $36,000 to $48,000 any other way. But even that is not enough. It’s never enough.
Reverse: Happy 67th, Mr. Toyoda
It was on this day in 1956, 67 years ago, that former Toyota CEO Akio Toyoda was born in Nagoya, Japan. Happy birthday to the one they call Morizo.